Escondido posts $600k surplus, defying deficit predictions

ESCONDIDO - Aggressive cost cutting at City Hall and some
unexpected pension money from the state helped Escondido officials
post a $591,000 budget surplus during 2006-07, defying last
winter's predictions that sagging sales-tax revenue would mean a
deficit of more than $2 million.

In a report to the City Council on Wednesday, city finance
officials said sales-tax revenue did indeed plummet in 2006-07 as
predicted. The final budget numbers indicate that the revenue
dropped $1.8 million, from $33.4 million in 2005-06 to $31.6
million in 2006-07.

But Gil Rojas, the city's finance director, said that overall
revenue was actually $1 million higher than the winter predictions
thanks to a $1.3 million windfall from the Public Employees
Retirement System, higher property taxes and higher franchise fees
from cable and power companies. Final numbers show overall revenue
was $87.1 million in 2006-07, which ended June 30.

Expenses were also far rosier than had been predicted last
winter, said Rojas, explaining that cost-cutting measures at City
Hall helped save $1.7 million. Five open jobs were not filled, and
department heads canceled some studies and postponed other projects
that were not time-sensitive, he said.

"When we realized sales tax was way down, the city manager
gathered his department heads together and let them know they
couldn't fill open positions," said Rojas. "We got cooperation and
great results. We wouldn't have ended up with a surplus based on
how the revenues ended up."

Final numbers show that expenses were $86.5 million in fiscal
2006-07.

Members of the council praised City Manager Clay Phillips and
his staff for averting the predicted deficit.

"It's been good that we've been proactive from the point where
it was clear there were problems,"' said Councilwoman Marie
Waldron, who served on the council's budget committee along with
Councilman Ed Gallo. Waldron said she is relieved that Escondido
won't have to make sharp cuts in public safety, which other cities
are contemplating this fall.

But Rojas and his staff warned that the city still faces some
significant budget concerns, primarily because sales tax is not
likely to rebound during the 2007-08 fiscal year. After six
consecutive years of sales-tax revenue increases, the city will
likely follow last year's dip with either no growth or very small
growth in 2007-08, he said.

The budget adopted in June for this year predicted a $1 million
shortfall overall, despite more cost-cutting measures and a
decision to leave six more open positions unfilled, said Rojas.
Without those cuts, the predicted deficit for this year would have
been about $2.5 million, he said.

The city also faces some long-term concerns, said Joy Canfield,
the city's finance manager.

"We are spending more money to keep our streets safe and to make
our city beautiful," said Canfield, referring to increases in
budgets for fire, police and code compliance.

But revenue has been growing at a much slower pace than
expenditures since 2003-04, and there is no end in sight, she
said.

"This is something we will be watching very closely," she
said.

In other business, the council:

Changed the name of the entry street into Orange Glen High
School from Midway Drive to Patriot Way in honor of the school's
mascot;

Approved Mills Act property tax discounts for a historic home
at 227 South Maple St. and a set of historic structures between 138
and 140 West Third Ave.;

Amended the process for approving swimming pool construction
permits to allow the city to collect money from contractors who
damage city property while installing pools; and